Ethics Newsline®

TOKYO
An ethics controversy is dominating Japan’s financial news after last week’s disclosure that the governor of the nation’s central bank invested in a fund implicated in an insider trading scandal.

The International Herald Tribune reported that the controversy erupted after the Bank of Japan (BOJ) governor, Toshihiko Fukui, told a parliamentary committee that he had invested the equivalent of about $90,000 in a stock market fund run by Yoshiaki Murakami, who was arrested two weeks ago on suspicion of insider trading.

Fukui, who exerts enormous power in Japanese finance, apologized for holding onto his investment in the fund — which initially was made when he was in the private sector — after he was appointed to the Bank of Japan, MarketWatch reported.

Fukui also said he had reaped considerable financial return from the fund, but did not provide exact figures. He promised to produce at a later date documents showing precisely how much he had earned.

The case has attracted considerable attention in Japan because arrested fund-manager Marakami had been viewed as a strong advocate of reform of corporate governance in that nation, according to the Mainichi Daily News, one of Tokyo’s leading newspapers.

Fukui also has been idolized as a financial wizard who has helped stabilize Japan’s shaky economy.

Fukui’s admission resulted in a stinging series of editorials in Japanese papers, several of which noted that Japan does not require the stringent financial disclosures by public-sector financial leaders that is expected in many other nations.

A Japan Times editorial also noted that Fukui had been trying to keep Japan’s economy from tanking by keeping interest rates on savings very low — near 0 percent, in fact.

“It would not be surprising if the timing of Mr. Fukui’s investment in the Murakami fund fuels public suspicion and anger,” the editorial said. “It coincides with a period when the BOJ, under its ultra-loose monetary policy, was keeping the short-term interest rate at almost zero percent. People blessed with money have had opportunities to make profits in the stock market while ordinary depositors have suffered from the rock-bottom interest rate.”

The Japan Times also noted that Japan’s Nikkei stock average fell more than 4 percent after Fukui’s admission — the biggest one-day drop since the terror attacks of 9/11.